Intersections Inc. Reports First Quarter 2007 Earnings; Results Show Record Revenue and Expanded Marketing

Intersections Inc. (NASDAQ:INTX) today announced financial results for the quarter ended March 31, 2007. Revenue for the first quarter of 2007 was $58.2 million, compared to $45.7 million for the quarter ended March 31, 2006 and $54.7 million for the quarter ended December 31, 2006, an increase of 27.4 percent and 6.4 percent, respectively. Net income for the quarter ended March 31, 2007 was $484 thousand, compared to $3.4 million for the quarter ended March 31, 2006 and $639 thousand for the quarter ended December 31, 2006, a decrease of 85.8 percent and 24.3 percent, respectively. Diluted earnings per share ("EPS”) were $0.03 for the first quarter of 2007, compared to $0.20 for the first quarter of 2006 and $0.04 for the fourth quarter of 2006. "Our marketing efforts continued to expand in the first quarter of 2007, driving a record revenue quarter,” said Chairman and Chief Executive Officer, Michael Stanfield. "Our subscription businesses were strong; because revenue trails our recognition of fulfillment costs and our commencement of amortization of marketing costs in a considerable portion of our business, our higher marketing and subscription additions negatively impacted earnings in the first quarter. We believe we are on track to meet the objectives we set forth for the year.” Our financial results include American Background Information Services, Inc. (ABI) for the period January 1, 2006 through May 30, 2006, and Screening International, LLC (SI), our joint venture that combined ABI with Control Risks Group Holdings Limited’s (CRG) background screening business, for the period May 31, 2006 through March 31, 2007. Our financial results also include Intersections Insurance Services, Inc. (IIS), formerly known as Chartered Marketing Services, Inc., which we acquired on July 3, 2006. IIS’s results are not separately reported. First Quarter 2007 Financial Highlights: Total subscribers increased to approximately 4.69 million as of March 31, 2007, compared to approximately 4.63 million subscribers as of December 31, 2006. Subscriber additions of approximately 949 thousand in the first quarter of 2007 were partially offset by subscriber cancels of 888 thousand. Cancellations in the quarter were impacted by approximately 250 thousand canceled subscribers at one of our clients, which was disclosed in the release of our 2006 year end results. Total revenue for the first quarter of 2007 was $58.2 million, including $6.6 million from SI, compared to $54.7 million, including $6.8 million from SI, for the fourth quarter of 2006 and $45.7 million for the first quarter of 2006, including $3.7 million from ABI. Subscription revenue, net of marketing and commissions associated with subscription revenue, increased to $31.9 million for the first quarter of 2007 from $30.9 million for the fourth quarter of 2006, and from $29.5 million for the first quarter of 2006, an increase of 3.1 percent and 8.0 percent, respectively. Subscription revenue, net of marketing and commissions associated with subscription revenue, is a non-GAAP financial measure that we believe is important to investors and one that we utilize in managing our business as subscription revenue normalizes the effect of changes in the mix of indirect and direct marketing arrangements. Income before taxes and minority interest was $456 thousand for the first quarter of 2007, including a loss before taxes and minority interest of $684 thousand for SI, compared to $890 thousand for the fourth quarter of 2006, including a loss before taxes and minority interest of $555 thousand for SI, and $5.6 million including $216 thousand of income before taxes for ABI for the first quarter of 2006. Cash flow used in operations for the quarter ended March 31, 2007, was approximately $1.4 million, primarily driven by our increased investment in marketing. The results of Intersections’ quarter ended March 31, 2007 will be discussed in more detail on April 30, 2007 at 5:00 pm EDT via teleconference. A live audio webcast will be available on Intersections’ Web site at www.intersections.com or www.fulldisclosure.com. Participants are encouraged to go to the selected Web site at least 15 minutes in advance to register, download, and install any necessary audio software. This webcast will be archived and available for replay after the teleconference. Additionally, the call will be available for telephonic replay from 7:00 p.m. Monday, April 30, through 11:59 p.m. Wednesday, May 2, 2007, at 888.286.8010, or if you are based internationally, at +1-617-801-6888 (Passcode: 25432837). Statements in this press release relating to future plans, results, performance, expectations, achievements and the like are considered "forward-looking statements.” Those forward-looking statements involve known and unknown risks and are subject to change based on various factors and uncertainties that may cause actual results to differ materially from those expressed or implied by those statements, including without limitation the effect of new subscriber additions. Factors and uncertainties that may cause actual results to differ include but are not limited to the risks disclosed in the Company’s filings with the U.S. Securities and Exchange Commission. The Company undertakes no obligation to revise or update any forward-looking statements. About Intersections Inc. Intersections Inc. (NASDAQ:INTX) is a leading provider of branded and fully customized identity management solutions. By integrating its technology solutions with its comprehensive services, Intersections safeguards more than 5 million customers, who are primarily received through marketing partnerships and consumer-direct marketing of the company’s Identity Guard® brand. Intersections also provides consumer-oriented insurance and membership products through marketing partnerships with the major mortgage servicers in the United States as well as other financial institutions through its subsidiary, Intersections Insurance Services, Inc. Additionally, through majority-owned Screening International LLC, Intersections provides pre-employment background screening services domestically and internationally in partnership with Control Risks Group Limited of the United Kingdom. Learn more about Intersections Inc. at www.intersections.com/aboutus.asp. INTERSECTIONS INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)   Three Months EndedMarch 31, (in thousands, except per share data)   2007  2006    Revenue $ 58,201  $ 45,688  Operating expenses: Marketing 7,984  5,285  Commissions 9,642  6,143  Cost of revenue 23,046  16,545  General and administrative 14,244  10,428  Depreciation and amortization 2,733  2,087    Total operating expenses 57,649  40,488    Income from operations 552  5,200  Interest income 285  535  Interest expense (338) (92) Other (expense)/income, net (43) 1    Income before income taxes and minority interest 456  5,644    Income tax expense (184) (2,231)   Income before minority interest 272  3,413    Minority interest 212  -    Net income $ 484  $ 3,413    Net income per basic share $ 0.03  $ 0.20    Net income per diluted share $ 0.03  $ 0.20    Weighted average common shares outstanding 16,956  16,704  Dilutive effect of common stock equivalents 444  531  Weighted average common shares outstanding – assuming dilution 17,400  17,235  INTERSECTIONS INC. CONSOLIDATED BALANCE SHEETS (Unaudited)   March 31,2007 December 31,2006 (in thousands) ASSETS   CURRENT ASSETS: Cash and cash equivalents $ 17,730  $ 15,580  Short-term investments 4,480  10,453  Accounts receivable, net 23,794  22,369  Prepaid expenses and other current assets 5,381  5,241  Income taxes receivable 1,528  2,113  Note receivable 910  750  Deferred subscription solicitation costs 14,890  11,786  Total current assets 68,713  68,292    PROPERTY AND EQUIPMENT—Net 21,158  21,699  GOODWILL 66,668  66,663  INTANGIBLE ASSETS 11,802  12,388  OTHER ASSETS 13,212  10,425  TOTAL ASSETS $ 181,553  $ 179,467    LIABILITIES AND STOCKHOLDERS' EQUITY   CURRENT LIABILITIES: Note payable $ 3,333  $ 3,333  Current obligations under capital leases 1,095  1,176  Accounts payable 9,300  5,193  Accrued expenses and other current liabilities 16,740  15,690  Accrued payroll and employee benefits 3,775  7,073  Commissions payable 1,324  1,194  Deferred revenue 3,396  5,292  Deferred tax liability 2,483  2,483  Total current liabilities 41,446  41,434    NOTE PAYABLE - Less current portion 10,556  11,667  OBLIGATIONS UNDER CAPITAL LEASES—Less current portion 1,391  1,637  OTHER LONG-TERM LIABILITIES 2,482  551  DEFERRED TAX LIABILITY 8,152  8,152    Minority Interest 11,239  11,450    STOCKHOLDERS' EQUITY:   Common stock 181  178  Additional paid-in capital 96,734  95,462  Treasury stock, 965,000 shares at cost (8,600) (8,600) Retained earnings 17,883  17,447  Accumulated other comprehensive loss 89  89  Total stockholders' equity 106,287  104,576    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 181,553  $ 179,467  INTERSECTIONS INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)   Three Months EndedMarch 31, 2007  2006  (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 484  $ 3,413  Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 2,757  2,111  Amortization of gain from sale leaseback (24) (24) Loss on disposal of fixed asset -  20  Minority interest (212) -  Amortization of debt issuance cost 20  -  Provision for doubtful accounts 12  (34) Stock based compensation 552  12  Amortization of deferred subscription solicitation costs 6,970  4,715    Changes in assets and liabilities: Accounts receivable (1,434) (1,796) Prepaid expenses and other current assets (254) (39) Income tax receivable 587  -  Deferred subscription solicitation costs (10,074) (4,028) Other assets (2,773) (1,077) Accounts payable 4,046  (708) Accrued expenses and other current liabilities 1,303  412  Accrued payroll and employee benefits (3,449) (361) Commissions payable 130  13  Income tax payable -  168  Deferred revenue (1,896) 853  Other long-term liabilities 1,864  (8)   Net cash (used in)/provided by operating activities (1,391) 3,642    NET CASH PROVIDED BY INVESTING ACTIVITIES: Net investments sold 5,973  57  Investment – Intersections Insurance Services, Inc. (5) -  Acquisition of property and equipment (1,552) (1,677)   Net cash provided by/(used in) investing activities 4,416  (1,620)   NET CASH PROVIDED BY FINANCING ACTIVITIES: Options exercised 722  23  Debt repayments (1,111) -  Note receivable (160) -  Capital lease payments (327) (415)   Net cash (used in)/provided by financing activities (876) (392)   EFFECT OF EXCHANGE RATE ON CASH 1  -    INCREASE IN CASH AND CASH EQUIVALENTS 2,150  1,630  CASH AND CASH EQUIVALENTS—Beginning of period 15,580  17,555  CASH AND CASH EQUIVALENTS—End of period $ 17,730  $ 19,185  INTERSECTIONS INC. OTHER DATA (Unaudited)   Three Months EndedMarch 31, (dollars in thousands)   2007  2006    Subscribers at beginning of period 4,625,831  3,659,975  New subscribers – indirect 560,448  571,969  New subscribers – direct 388,093  142,133  Cancelled subscribers within first 90 days of subscription 237,999  250,780  Cancelled subscribers after first 90 days of subscription 649,976  374,083  Subscribers at end of period 4,686,397  3,749,214    Indirect subscribers 65.8% 68.2% Direct subscribers 34.2  31.8  100.0% 100.0%   Cancellations within first 90 days of subscription 25.1% 35.1% Cancellations after first 90 days of subscription 30.4% 26.3%   Overall retention 61.6% 62.9%   Percentage of revenue from indirect marketing arrangements to total subscription revenue 36.7% 40.3%   Percentage of revenue from direct marketing arrangements to total subscription revenue 63.3  59.7    Total subscription revenue 100.0% 100.0%   Total revenue $ 58,201  $ 45,688  Revenue from transactional sales ( 8,691) (4,756) Revenue from lost/stolen credit card registry (20) (20) Subscription revenue 49,490  40,912    Marketing and commissions 17,626  11,428  Commissions paid on transactional sales (5) (11) Commissions paid on lost/stolen credit card registry (6) (8) Marketing and commissions associated with subscription revenue 17,615  11,409    Subscription revenue, net of marketing and commissions associated with subscription revenue $ 31,875  $ 29,503